Experience Gains in Health FSA

[Guest JulieJ]

Do experience gains from a Health FSA have to be "kept within the Plan?" What I mean is that I have gotten conflicting information that on one hand (i.e., DOL information) that excess funds that are forfeited by participants in a plan year for a health FSA can either be used to: 1) defray administrative costs by the employer; 2) be returned to participants uniformly in the form of cash subject to income tax; 3) be used to reduce future premium amounts in the next plan year; or 4) be used to increase the annual maximum for the next plan year. The DOL states that the monies received by the participants are "plan assets," so any excess must be used for the strict use of the Plan and cannot be arbitrarily used by the employer any way they choose. On the other hand, I have been told that the IRS is silent regarding the excess funds, and that since they were forfeited by the participants then those funds are the employers to do whatever they want to. Any help, especially specific IRS or DOL regulation information, would be most appreciated. Thanks!!

[Guest Beth N]

I have the same question. Does anyone have an answer?